The Trump trade has reversed
Market veterans have already begun talking about the Trump trade coming to an end. “The Trump trade has already reversed,” Cartica Management CEO Teresa Barger recently advised at the recent SALT conference. “Over the past 4 months we’ve seen inflows into the emerging markets (EEM) (VWO),” said Barger.
Emerging markets: the turnaround happened last summer
According to Barger, Donald Trump-initiated reforms on tax and regulation are positive for emerging markets (IEMB) (EMB) (SCHE). Additionally, “we’re also seeing the emerging markets in their inflection point since the summer of 2016,” said Barger who has seen the decoupling of trade relations between the emerging markets and the US.
Now, the emerging markets didn’t really perform through 2013 and 2016. The iShares MSCI Emerging Markets ETF (EEM) was down about 25% between January 2013 and May 2016. “The turnaround happened last summer,” noted Barger. Since June 2016, the EEM has reversed losses. The ETF is up about 25% since June 2016. Factors that have led to this performance include:
- Improving sales
- Reversing of margin compression
- Rising earnings per share growth
The emerging markets are in “a very good setup” right now
“Coming now into 2017, we’re looking at EPS growth of 19%, so that’s the best in the world,” said Barger affirming her belief in India’s growth story. The emerging markets are in “a very good setup” right now.